Signs are pointing to another bailout of Japan Airlines by the Tokyo-based government. That means the carrier could survive without being broken into pieces.

JAL is still prized for its significant and presumably lucrative routes around Asia. That makes it attractive to US carriers who want a large piece of the business in the fastest growing region in the world.  Several American airlines have tried to create alliances with JAP only to be stymied by its financial troubles.

Bloomberg reports that Delta (NYSE:DAL) and American (NYSE:AMR) are back in Japan seeking an alliance in JAL which may include a cash infusion.

The US airlines want to be careful what they wish for. Japan’s influence in the greater-Asia region is shrinking and air travel in Japan has fallen has it has in America. JAL is likely to be challenged by the large international carriers in China and South Korea. China’s airlines, in particular,  have access to government capital to increase the sizes of their fleets with newer, more fuel efficient aircraft.

American airlines have a second challenge if they invest in JAL. American and Delta still carry multi-billion debt loads and any money they put into the JAL may be money that they eventually need themselves if the downturn in air travel persists.

JAL may seem to be a very attractive investment and a quick entrance into Asia, but what may look good on paper could be difficult in reality.

Douglas A. McIntyre

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